<PAGE> 1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to __________
Commission File Number: 0-10018
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DSC COMMUNICATIONS CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 54-1025763
- ------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 Coit Road, Plano, Texas 75075
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(972) 519-3000
--------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- ------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Number of Shares Outstanding
Title of Each Class as of October 31, 1996
- ---------------------------- -------------------------------
Common Stock, $.01 Par Value 117,244,100
Page 1 of 17
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
DSC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------ -----------
(Unaudited)
<S> <C> <C>
Assets
- ---------------------------------------------------------------------
CURRENT ASSETS
Cash and cash equivalents.......................................... $ 133,654 $ 258,565
Marketable securities.............................................. 286,803 310,699
Receivables........................................................ 337,559 277,006
Inventories........................................................ 329,169 303,962
Deferred tax asset................................................. 76,516 27,202
Other current assets............................................... 60,381 43,113
------------ ------------
Total current assets.......................................... 1,224,082 1,220,547
------------ ------------
PROPERTY AND EQUIPMENT, at cost...................................... 740,650 675,725
Less accumulated depreciation
and amortization.................................................. (341,852) (305,203)
------------ ------------
398,798 370,522
------------ ------------
LONG-TERM RECEIVABLES................................................ 32,327 17,557
CAPITALIZED SOFTWARE DEVELOPMENT COSTS............................... 48,297 43,821
COST IN EXCESS OF NET ASSETS OF
BUSINESSES ACQUIRED, NET........................................... 148,256 155,102
OTHER................................................................ 70,859 57,726
------------ ------------
Total assets.............................................. $ 1,922,619 $ 1,865,275
============ ============
Liabilities and Shareholders' Equity
- --------------------------------------------------------------------
CURRENT LIABILITIES
Short-term debt.................................................... $ 39,446 $ 83,438
Accounts payable................................................... 120,522 115,137
Accrued liabilities................................................ 255,071 220,679
Income taxes payable............................................... 5,328 29,230
Current portion of long-term debt.................................. 32,937 33,098
------------ ------------
Total current liabilities..................................... 453,304 481,582
------------ ------------
LONG-TERM DEBT, net of current portion............................... 276,036 210,441
NONCURRENT INCOME TAXES
AND OTHER LIABILITIES............................................... 75,890 49,173
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, $.01 par value, issued -
122,218 in 1996 and 120,591 in 1995;
outstanding - 117,229 in 1996 and
115,602 in 1995................................................... 1,222 1,206
Additional capital................................................. 722,052 703,448
Unrealized gains (losses) on securities,
net of income taxes............................................... (509) 391
Accumulated translation adjustment................................. 5,097 4,404
Retained earnings ................................................. 432,638 457,741
------------ ------------
1,160,500 1,167,190
Treasury stock, at cost, 4,989 shares.............................. (43,111) (43,111)
------------ ------------
Total shareholders' equity...................................... 1,117,389 1,124,079
Total liabilities and ------------ ------------
shareholders' equity.................................... $ 1,922,619 $ 1,865,275
============ ============
</TABLE>
See the accompanying Notes to Condensed Consolidated Financial Statements.
Page 2 of 17
<PAGE> 3
DSC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- -------------------------------
1996 1995 1996 1995
------------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
Revenue...................................... $ 326,003 $ 370,119 $ 990,331 $ 1,048,127
Cost of revenue
Special charges related to inventories
and associated assets.................... 82,500 -- 82,500 --
Other...................................... 215,046 195,713 602,889 537,325
------------- ---------- ----------- ------------
Total cost of revenue..................... 297,546 195,713 685,389 537,325
------------- ---------- ----------- ------------
Gross profit............................... 28,457 174,406 304,942 510,802
------------- ---------- ----------- ------------
Operating costs and expenses:
Research and product development........... 49,705 47,597 155,324 142,482
Selling, general and administrative........ 57,927 52,552 171,429 149,379
Special charges for excess facilities
and equipment............................ 13,500 -- 13,500 --
Other operating costs...................... 2,464 2,320 7,510 6,732
------------- ---------- ----------- ------------
Total operating costs and expenses....... 123,596 102,469 347,763 298,593
------------- ---------- ----------- ------------
Operating income (loss).................... (95,139) 71,937 (42,821) 212,209
Interest income.............................. 5,658 7,845 18,909 19,237
Interest expense............................. (6,514) (6,278) (19,806) (11,605)
Other income (expense), net.................. 2,624 177 3,229 (1,744)
------------- ---------- ----------- ------------
Income (loss) before income taxes........ (93,371) 73,681 (40,489) 218,097
Income taxes................................. (35,481) 24,314 (15,386) 74,859
------------- ---------- ----------- ------------
Net income (loss)........................ $ (57,890) $ 49,367 $ (25,103) $ 143,238
============= ========== =========== ============
Income (loss) per share...................... $ (0.49) $ 0.42 $ (0.22) $ 1.21
============= ========== =========== ============
Average shares used in computation........... 116,964 118,668 116,269 117,946
</TABLE>
See the accompanying Notes to Condensed Consolidated Financial Statements.
Page 3 of 17
<PAGE> 4
DSC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------------
1996 1995
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)................................................................ $ (25,103) $ 143,238
Adjustments to reconcile net income (loss) to net
cash provided by (used for) operating activities:
Special charges.............................................................. 96,000 --
Depreciation and amortization................................................ 68,884 58,288
Amortization of capitalized software
development costs......................................................... 18,641 15,144
Deferred income taxes........................................................ (59,471) --
Increase in current and
long-term receivables......................................................... (74,722) (59,596)
Increase in inventories.......................................................... (81,307) (90,807)
Other, including changes in current
payables and other current assets.............................................. (21,928) 57,640
Increase in noncurrent income taxes
and other liabilities.......................................................... 26,717 40,478
---------- ----------
NET CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES..................................................... (52,289) 164,385
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment.............................................. (96,181) (116,416)
Additions to capitalized software
development costs.............................................................. (28,117) (18,772)
Purchases of marketable securities............................................... (1,069,760) (670,757)
Proceeds from sales and maturities of
marketable securities.......................................................... 1,094,814 593,429
Other............................................................................ (6,729) (3,362)
---------- ----------
NET CASH USED FOR
INVESTING ACTIVITIES..................................................... (105,973) (215,878)
---------- ----------
</TABLE>
(Continued)
Page 4 of 17
<PAGE> 5
DSC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Continued)
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------------
1996 1995
---------- ----------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in short-term debt........................................... (43,992) 2,304
Borrowings under long-term debt arrangements..................................... 95,709 241,081
Payments on long-term debt arrangements.......................................... (30,275) (28,976)
Proceeds from the sale of common stock
under stock programs......................................................... 12,351 19,637
Other............................................................................ (442) (701)
---------- ----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES.......................................................... 33,351 233,345
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................................................... (124,911) 181,852
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD................................... 258,565 52,942
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD......................................... $ 133,654 $ 234,794
========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid.................................................................... $ 12,249 $ 1,124
========== ==========
Income taxes paid................................................................ $ 54,376 $ 53,202
========== ==========
</TABLE>
See the accompanying Notes to Condensed Consolidated Financial Statements.
Page 5 of 17
<PAGE> 6
DSC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 1996 and 1995 and December 31, 1995
(Unaudited)
BASIS OF PRESENTATION
The accompanying unaudited Condensed Consolidated Financial Statements reflect,
in the opinion of management, all adjustments necessary to present fairly the
Company's financial position, results of operations and cash flows. Such
adjustments are of a recurring nature unless otherwise disclosed herein.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to rules and regulations promulgated by
the Securities and Exchange Commission. However, the Company believes that the
disclosures contained herein are adequate to make the information presented not
misleading. Quarterly consolidated financial results may not be indicative of
annual consolidated financial results.
The Company has not paid or declared a cash dividend on its common stock since
its organization.
Certain prior year's financial statement information has been reclassified to
conform to current year financial statement presentation.
These unaudited financial statements should be read in conjunction with the
audited financial statements and accompanying notes included in the Company's
1995 Annual Report to Shareholders for the year ended December 31, 1995.
SPECIAL CHARGES
During the third quarter of 1996, the Company reassessed the business prospects
of certain of its newer products. Management concluded that the longer-term
outlook for these products was favorable, but forecasted business levels in the
near-term would not sustain the carrying value of certain assets. As a result,
the Company recorded special charges of $96.0 million, including $82.5 million
(cost of revenue) related primarily to provisions for excess and obsolete
inventories, deferred development costs, and associated assets. Additionally,
$13.5 million was included in operating expenses for provisions for excess
equipment and facilities.
Page 6 of 17
<PAGE> 7
INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
<S> <C> <C>
Raw Materials . . . . . . . . . . . . . . . . . . . . . . $ 124,456 $ 137,002
Work in Process . . . . . . . . . . . . . . . . . . . . . 26,371 20,015
Finished Goods . . . . . . . . . . . . . . . . . . . . . . 178,342 146,945
----------- ----------
$ 329,169 $ 303,962
=========== ==========
</TABLE>
CREDIT AGREEMENTS AND DEBT
At December 31, 1995, the Company had a domestic credit facility with two banks
providing for borrowings up to $50.0 million, reduced by the value of
outstanding letters of credit issued by the banks on behalf of the Company.
In May 1996, the Company entered into a five-year, unsecured $160.0 million
revolving credit facility with several banks. This new facility, which
replaced the existing domestic credit facility, provides for borrowings and
issuances of letters of credit in multiple currencies. Borrowings under the
new facility bear interest at various borrowing rates, including the prime rate
or 0.25% to 0.70% above the LIBOR rate. A commitment fee of 0.10% to 0.225% on
the daily average unused portion of the facility is also assessed. The maximum
borrowings available under the facility are reduced by the value of outstanding
letters of credit issued by the banks on behalf of the Company. The letters of
credit issued by the banks under this agreement at September 30, 1996 totaled
$30.8 million, including $29.1 million issued to support various foreign
subsidiary credit agreements. This facility contains various financial
covenants.
In July 1996, approximately $95.7 million of short-term borrowings were
replaced with two unsecured loans, a $52.2 million loan maturing over five
years and a $43.5 million loan maturing over fifteen years. The term loans are
denominated in Danish Kroner and have adjustable interest rates based on market
interest rates in Denmark. The interest rates on these loans at September 30,
1996 were 4.5% to 5.0%. Interest payments are required quarterly with
principal payments beginning in the fourth year the loans are outstanding.
These loans contain various financial covenant requirements.
The Company's short-term borrowings include foreign subsidiary borrowings with
local banks, of which $39.4 million were outstanding at September 30, 1996.
Page 7 of 17
<PAGE> 8
INCOME TAXES
The Company provided an income tax benefit of $15.4 million for the first nine
months of 1996 using a 38% effective tax rate. The income tax benefit and
related deferred tax asset were recorded based on the Company's operating
history as well as a current assessment that the Company will generate taxable
earnings in the future.
The Company's income taxes include federal, foreign and state (including Puerto
Rico) income taxes. The effective tax rate is based upon estimates for the
full year for a number of estimates including, among other things, forecasted
operating results in the United States and foreign jurisdictions. The
effective tax rate could change as estimates of these and other variables are
finalized at the end of the year.
OTHER INCOME (EXPENSE), NET
In the second and third quarter of 1996, the Company received approximately $10
million of proceeds related to the settlement of certain litigation.
Approximately $3.0 million was recorded in the second quarter of 1996 with the
remainder recorded during the third quarter of 1996. Other Income (Expense),
Net also included the litigation expenses and applicable costs associated with
this litigation. See "Litigation" under "Commitment and Contingencies" for
further information.
COMMITMENTS AND CONTINGENCIES
Contingent Liabilities
The Company periodically sells customer receivables and operating leases under
agreements which contain recourse provisions. The Company could be obligated
to repurchase a portion of certain receivables and operating leases which were
sold in 1995 on a partial recourse basis, the terms of which allow the Company
to limit its risk of loss to approximately $7.8 million at September 30, 1996.
The Company also has guarantees of $27.7 million outstanding at September 30,
1996 supporting bid and performance bonds to customers and others, of which
$1.7 million were collateralized by letters of credit issued under the
Company's credit facility. The Company believes it has adequate reserves for
any ultimate losses associated with these contingencies.
The Company, in management of its exposure to fluctuations in foreign currency
exchange rates, enters into forward foreign exchange contracts for both firm
commitments and anticipated transactions of sales and purchases which are
denominated in foreign currencies. At
Page 8 of 17
<PAGE> 9
September 30, 1996, the Company had forward foreign exchange contracts of $51.5
million outstanding.
Litigation
On July 20, 1993, the Company filed suit against Advanced Fibre Communications
("AFC"), a California corporation; Quadrium Corporation ("Quadrium"), a
California corporation; and two individuals. AFC filed various counterclaims
against the Company. On June 24, 1996, the parties reached an agreement to
settle all claims. As part of the settlement, the Company received $3 million
and 719,424 shares of AFC common stock at the end of June 1996. In addition,
in late July 1996 AFC made an early payment of approximately $7.0 million
originally scheduled to be received over the next five years for the remaining
amounts due under the settlement.
On April 10, 1995, the Company filed a lawsuit against Next Level
Communications ("NLC") and two former Company employees, alleging breach of
contract and the misuse of Company trade secrets. The Company is seeking an
injunction prohibiting NLC and the former employees from continued use of
Company trade secrets and opportunities. On March 28, 1996, the Company
received a favorable jury verdict in the amount of $369.2 million in damages.
On April 10, 1996, the court issued an injunction against NLC prohibiting the
transfer of the Company's trade secrets or disclosure of such trade secrets,
except in the ordinary course of business. On June 11, 1996, the court entered
a judgment reducing the jury verdict in the Company's favor to $137.7 million.
The Company and NLC both appealed the judgment and oral arguments were held on
September 30, 1996. An opinion from the Fifth Circuit Court is expected within
the next several months.
On February 14, 1996, the Company joined Bell Atlantic in bringing an antitrust
action against AT&T Corporation ("AT&T") and Lucent Technologies, Inc.
("Lucent") alleging the use of monopoly power in the central office switch
market as part of a scheme to gain an unfair competitive advantage in the
remote digital terminal market. The Company is seeking to compel AT&T and
Lucent to open up the interfaces to the central office switch so that any
manufacturer will have the ability to compete with applications, software,
features, and services, and will more rapidly deliver to its customers the
enhanced functionality that they have come to expect. In July 1996, Lucent
brought a counterclaim against the Company alleging a "false advertising" claim
under the Lanham Act.
The Company is also party to other routine legal proceedings incidental to its
business.
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<PAGE> 10
The Company does not believe the ultimate resolution of the above litigation
will have a material adverse effect on its consolidated financial position.
COMMON STOCK
At the April 25, 1996 Annual Shareholders' Meeting, the shareholders approved
certain amendments to and an increase of 6 million shares of common stock
subject to the DSC Communications Corporation 1993 Employee Stock Option and
Securities Award Plan.
STOCK RIGHTS
On April 25, 1996, the Board of Directors declared a dividend of one preferred
stock purchase right on each outstanding share of the Company's common stock.
The dividend was paid on May 22, 1996 to shareholders of record on that date,
the same date the existing stock rights expired. The rights become exercisable
only on the close of business ten days following a public announcement that a
person or group has acquired 15% or more of the outstanding shares of common
stock of the Company or a public announcement or commencement of a tender offer
or exchange offer which would result in the offeror's acquiring 15% or more of
the outstanding shares of common stock of the Company. Once exercisable, each
right would entitle a holder to buy 1/1000 of a share of the Company's Series B
Junior Participating Preferred Stock at an exercise price of $175.00. The
Company may redeem the rights, which expire on April 25, 2006, for $0.01 per
right prior to the rights becoming exercisable.
Page 10 of 17
<PAGE> 11
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
With the exception of historical information, the matters discussed or
incorporated by reference in this Quarterly Report on Form 10-Q are
forward-looking statements that involve risks and uncertainties including, but
not limited to, economic conditions, product demand and industry capacity,
competitive products and pricing, manufacturing efficiencies, new product
development, ability to enforce patents, availability of raw materials and
critical manufacturing equipment, new plant startups, the regulatory and trade
environment, and other risks indicated in filings with the Securities and
Exchange Commission.
Results of Operations
For the three months ended September 30, 1996, the Company recorded revenue of
$326.0 million and a net loss of $57.9 million, or $0.49 per share, which
included special charges totaling $96.0 million as discussed in "Special
Charges" in Notes to Condensed Consolidated Financial Statements. Excluding
the effects of the special charges, the Company would have recorded net income
for the quarter totaling $1.6 million, or $0.01 per share. Revenue was $370.1
million and net income was $49.4 million, or $0.42 per share, for the same
period of 1995. For the nine months ended September 30, 1996, the Company
recorded revenue of $990.3 million and a net loss of $25.1 million, or $0.22
per share, which included the $96.0 million of special charges noted above.
For the nine months ended September 30, 1995, the Company recorded revenue of
$1,048.1 million and net income of $143.2 million, or $1.21 per share. The
Company's net income excluding the effects of the special charges would have
been $34.4 million, or $0.29 per share, for the nine months ended September 30,
1996.
The decline in revenue during the 1996 third quarter from the comparable period
of 1995 resulted primarily from reduced deliveries of several of the Company's
primary products, including switching and transmission equipment and optical
access systems. The revenue decline for the nine months ended September 30,
1996 compared to the same period of 1995 was the result of reduced deliveries
of the Company's switching equipment and slower European transmission business
experienced in the first half of 1996, offset partially by increased deliveries
of the Company's access products. The Company believes that sales of its more
mature products were negatively impacted by pending FCC rulemaking procedures,
associated court challenges of the recent telecom legislation and by mergers
and
Page 11 of 17
<PAGE> 12
consolidations among the Company's customer base. The Company could continue
to experience delays in customer purchasing decisions until the uncertainties
created by these items are resolved.
As further discussed in "Special Charges" in Notes to Condensed Consolidated
Financial Statements, non-cash special charges of $96.0 million were provided in
the third quarter of 1996. The special charges related primarily to a reduction
in the carrying value of certain assets for several newer products, Airspan(TM),
Litespan(R)-120 and iMTN(R). Although not currently anticipated, delays in
development or customer acceptance of products developed in the future could
result in adjustments to carrying values of any assets associated with such new
products.
Gross profit as a percentage of revenue excluding the effects of the special
charges was 34% and 39% for the third quarter and nine months ended September
30, 1996, respectively, compared to 47% and 49% in the same periods of 1995.
The decreases in gross profit as a percentage of revenue were primarily the
result of a shift in the mix of products sold and lower than anticipated
business volumes. As experienced in the 1996 periods, the Company's gross
margin percentage in future periods could vary significantly due to changes in
the relative mix of product deliveries and software content.
Research and product development expense in the third quarter of 1996 was $49.7
million, or 15% of revenue, compared to $47.6 million, or 13% of revenue, for
the third quarter of 1995. Research and product development expense for the
first nine months of 1996 and 1995 was $155.3 million, or 16% of revenue, and
$142.5 million, or 14% of revenue. The Company continues to make a substantial
investment in research and development to maintain the Company's on-going
development of new products and enhancements to existing products across all
strategic product areas.
Selling, general and administrative expense was $57.9 million and $171.4 million
in the third quarter and first nine months of 1996, respectively, compared to
$52.6 million and $149.4 million, for the comparable periods of 1995. This
expense growth resulted primarily from increased international selling
activities and higher legal costs. As a percentage of revenue, selling, general
and administrative expense was 18% for the third quarter of 1996 and 17% for the
first nine months of 1996 compared to 14% for both the third quarter and first
nine months of 1995. The Company is actively pursuing claims related to its
intellectual property rights and, as this litigation progresses, legal expenses
may continue to increase. See "Litigation" under "Commitments and
Contingencies" in Notes to Condensed Consolidated Financial Statements for
further discussion.
Page 12 of 17
<PAGE> 13
DSC Communications A/S, the Company's Denmark subsidiary, incurred an operating
loss in the third quarter and first nine months of 1996 due primarily to the
delayed introduction of a new generation of optical transmission equipment.
While deliveries of certain of these new products have begun, future near-term
profitability of DSC Communications A/S is dependent upon the successful
completion and market acceptance of these products.
Interest expense for the first nine months of 1996 increased compared to the
same period of 1995 due primarily to the $225 million loan entered into in
April 1995 which bears interest at 9%. Interest expense has also increased as
a result of borrowings under several foreign subsidiary borrowing arrangements.
Included in Other Income (Expense), Net in 1996 are amounts received related to
the settlement of certain litigation. See "Litigation" under "Commitments and
Contingencies" in Notes to Condensed Consolidated Financial Statements for
further discussion.
See "Income Taxes" in Notes to Condensed Consolidated Financial Statements for
information on the Company's income taxes during 1996.
The Company has certain forward exchange contracts which were entered into
based upon anticipated future business transactions. Although these forward
contracts totaled only $2.5 million at September 30, 1996, future earnings
could be affected by the Company's practice of entering into these types of
forwards as forward contracts related to anticipated transactions are
marked-to-market each period.
The Company's future quarterly and annual operating results may be affected by
a number of factors, including the timing and ultimate receipt of orders from
certain customers which continue to constitute a large portion of the Company's
revenue; the successful enhancement of existing products; introduction and
market acceptance of new products on a timely basis; mix of products sold;
product costs; manufacturing lead times; significant fluctuations in foreign
currency exchange rates; and changes in general worldwide economic conditions,
any of which could have an adverse impact on operations.
Financial Condition and Liquidity
The Company's cash and cash equivalents at September 30, 1996 were $133.7
million compared to $258.6 million at December 31, 1995 while marketable
securities were $286.8 million at September 30, 1996 compared to $310.7 million
at December 31, 1995.
The Company used $52.3 million of cash for operating activities during the
first nine months of 1996. Receivables and inventories
Page 13 of 17
<PAGE> 14
growth exceeded cash generated from earnings before depreciation, amortization,
deferred income taxes and non-cash special charges. Receivables growth of $74.7
million was due primarily to longer payment terms and payment cycles in the
international marketplace, a higher level of customer financing in the domestic
marketplace and a larger percentage of product shipments occurring in the later
portion of the quarter limiting current quarter collections. Inventories
growth, net of the special charges, of $25.2 million was due primarily from the
lower than anticipated customer orders for third quarter shipments.
Investing activities during the nine months ended September 30, 1996 included
additions to property and equipment of $96.2 million. The Company's domestic
and international operations will require additional capital expenditures, but
the timing and extent of these additional capital requirements will be
dependent upon future business growth. It is anticipated that 1996 capital
requirements could be in the range of $130 million.
In April 1996, the Company made its first annual scheduled principal payment of
$28.1 million on the $225 million loan obtained during the second quarter of
1995.
In July 1996, the Company replaced approximately $95.7 million of the amounts
outstanding under short-term credit agreements with two unsecured loans. See
"Credit Agreements and Debt" in Notes to Condensed Consolidated Financial
Statements for further information.
As discussed in "Credit Agreements and Debt" in Notes to Condensed Consolidated
Financial Statements, the Company replaced its existing domestic credit facility
with an unsecured $160.0 million revolving credit agreement in early May 1996.
No borrowings were outstanding under this new credit facility at September 30,
1996. Outstanding letters of credit, which totaled $30.8 million at September
30, 1996, reduce the amount of available borrowings.
The Company's debt agreements contain various financial covenants including,
among others, minimum net worth, maintenance of certain fixed charge ratios and
maximum allowable indebtedness to net worth. Although not anticipated, should
future operating performance remain at the third quarter 1996 level before the
special charges, waivers or amendments to loan agreements could be necessary to
maintain compliance with the covenant provisions of the agreements.
The Company is party to certain litigation, as disclosed in "Litigation" under
"Commitment and Contingencies" in Notes to Condensed Consolidated Financial
Statements, the outcome of which the Company believes will not have a material
adverse effect on its consolidated financial position.
Page 14 of 17
<PAGE> 15
The Company believes that its existing cash and marketable securities and
available credit facilities will be adequate to support the Company's financial
resource needs, including working capital requirements, capital expenditures,
operating lease obligations, and debt payments. In order to be competitive in
the future, the Company believes that it will become increasingly necessary to
offer financing alternatives to both domestic and international customers.
To the extent such financing becomes significant, additional borrowings could
become necessary.
Page 15 of 17
<PAGE> 16
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
A. Exhibits.
10.1 First Amendment (effective September 27, 1996) to the
250 million Danish Kroner and the 300 million Danish Kroner
Promissory Notes to Den Danske Bank, Guaranty and
Subordination Agreement dated July 23, 1996.
10.2 First Amendment (effective September 27, 1996) to
Multicurrency Credit Agreement dated May 8, 1996.
11. Computation of Income Per Share.
27. Financial Data Schedule (for EDGAR filing purposes only)
B. Reports on Form 8-K.
No reports on Form 8-K have been filed during the three months ended
September 30, 1996.
Page 16 of 17
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DSC COMMUNICATIONS CORPORATION
<TABLE>
<S> <C> <C>
Dated: November 14, 1996 By: /s/ Kenneth R. Vines
--------------------
Kenneth R. Vines
Vice President, Finance,
duly authorized officer
and principal accounting
officer
</TABLE>
Page 17 of 17
<PAGE> 18
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.1 - First Amendment (effective September 27, 1996) to the 250
million Danish Kroner and the 300 million Danish Kroner
Promissory Notes to Den Danske Bank, Guaranty and
Subordination Agreement dated July 23, 1996.
10.2 - First Amendment (effective September 27, 1996) to
Multicurrency Credit Agreement dated May 8, 1996.
11. - Computation of Income Per Share
27. - Financial Data Schedule (for EDGAR filing purposes only)
</TABLE>
<PAGE> 1
EXHIBIT 10.1
[DEN DANSKE BANK]
DSC Communications A/S (the "Borrower")
Lautrupbjerg 7-11
DK-2750 Ballerup, Denmark Date:
October 11, 1996
Attn: Mr. Christian J. Ornes
Power of Attorney
DSC Communications Corporation & Subsidiaries
1000 Coit Road Contact Person:
Plano, TX 75075-5813 Mogens Sondergaard
(212) 984-8472
Attn: Mr. Christian J. Ornes
Vice President & Treasurer
Re: First Amendment to promissory note issued by the Borrower to the order
of Den Danske Bank Aktieselskab (the "Bank"), delivered by the Borrower
to the Bank in New York, New York, dated July 23, 1996, and evidencing a
Loan in the amount of DKK 250,000,000 (the "15-Year Promissory Note");
First Amendment to promissory note issued by the Borrower to the order of
the Bank, delivered by the Borrower to the Bank in New York, New York,
dated July 23, 1996, and evidencing a Loan in the amount of DKK
300,000,000 (the "5-Year Promissory Note"; each of the 15-Year Promissory
Note and the 5-Year Promissory Note shall be considered a "Note" and
together the "Notes");
Guaranty issued by the Guarantors in favor of the Bank in support of
the loans evidenced by the Notes and the related facilities, and dated
July 23, 1996 (the "Guaranty"); and
Subordination Agreement dated as of July 23, 1996, among DSC
Communications Corporation and its subsidiaries named therein as
Subordinated Creditors, the Borrower as Obligor therein, and the Bank
(the "Subordination Agreement")
- --------------------------------------------------------------------------------
Dear Mr. Ornes:
I. Pursuant to your request and in consideration of the covenants,
conditions, and agreements hereafter set forth and for other good and valuable
consideration, the receipt and adequacy of which is acknowledged, the Bank
herewith proposes amendments to each of the Notes for the purpose of adjusting
one of the ratios in each of these Notes. For the purposes of this First
Amendment Letter, the capitalized terms not otherwise defined herein shall have
the meanings assigned to such terms in the Notes, the Guaranty, or the
Subordination Agreement, as the case may be.
II. It is proposed that Section 5(i) of each of the Notes be amended as of
September 27, 1996 (the "Effective Date"), to read as follows:
"(i) on the last day of any fiscal quarter the Consolidated Funded Debt
to Consolidated Excess Cash Flow Ratio shall exceed 3.25 to 1 (for
the purposes hereof, the term "Consolidated Funded Debt to
Consolidated Excess Cash Flow Ratio" and the defined terms on which
such ratio depends shall have the same meanings as in the
Multicurrency Credit Agreement); provided, however, for the
purposes of the determination of the Consolidated Funded Debt to
Consolidated Excess Cash Flow Ratio for the fiscal quarter ending
September 27, 1996, and the three immediately following fiscal
quarters, there shall be excluded from the calculation of
Consolidated EBITDA the special charge to be taken against pre-tax
earnings of the Parent and its consolidated subsidiaries for the
fiscal quarter ending September 27, 1996, in an amount not to
exceed US$96,500,000; or"
<PAGE> 2
[DEN DANSKE BANK]
October 11, 1996
III. This amendment shall be effective as of the Effective Date subject to the
Bank's receipt of a counterpart of this First Amendment Letter duly executed by
the Borrower and acknowledged by the Guarantors and the Subordinated Creditors,
together with documents in form and substance acceptable to the Bank evidencing
the authority of those executing to sign.
IV. The Borrower represents and warrants to the Bank that (1) after giving
effect to the above amendment, no Event of Default shall have occurred and be
continuing under either of the Notes or any of the Loan Documents, (2) the
representations and warranties contained in the Notes and the Loan Documents are
true and correct on and as of the Effective Date, (3) it has no claims or
offsets against, or defenses or counterclaims to, its obligations under the
Notes and the Loan Documents, (4) it has full power and authority to execute and
deliver this First Amendment Letter and commit to the First Amendment so that
its obligations under the Notes as so amended constitute its legal, valid, and
binding obligations, enforceable in accordance with their respective terms,
except as enforceability may be limited by applicable debtor relief laws, and
(5) no authorization, approval, consent or other action by, notice to, or filing
with, any governmental authority or other person, is required for the execution,
delivery or performance of the terms of this First Amendment Letter.
V. By signing below, each of the Guarantors and Subordinated Creditors (i)
acknowledges, consents, and agrees to the execution, delivery, and
effectiveness of this First Amendment Letter and the First Amendment to each of
the Notes, (ii) acknowledges and agrees that its obligations in respect of the
Guaranty and the Subordination Agreement are not released, diminished, waived,
modified, impaired, or affected in any manner by the provisions of this First
Amendment Letter and the First Amendment to each of the Notes, and (iii)
ratifies and confirms its obligations under the Guaranty and the Subordination
Agreement.
VI. This First Amendment Letter and the First Amendment shall be construed in
accordance with, and governed by Danish law. The signatories hereto agree that
any legal action or proceeding with respect to this Note or any agreement,
instrument or document (including the Loan Documents) entered into in
furtherance hereof or thereof may be brought in the Courts of Denmark, and, by
execution and delivery of this First Amendment Letter, the Borrower hereby
accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. The Borrower hereby
irrevocably waives trial by jury and any objection, including, without
limitation, any objection based on the grounds of forum non conveniens which it
may now or hereafter have to the bringing of any such action or proceeding in
such respective jurisdictions. The Borrower hereby agrees that service of
process in any such action or proceeding may be made by the mailing of copies of
such process by registered or certified mail, postage prepaid, to the Borrower
at its address specified above or to any address of which the Borrower shall
have given notice to the Bank. Nothing herein shall affect the right of the Bank
to serve process in any other manner permitted by law or to commence legal
proceedings or otherwise to proceed against the Borrower or its property in any
other jurisdiction.
Please signify your agreement to the proposed First Amendment to each of the
Notes and this First Amendment Letter by executing and returning the copy of
this letter to the Bank.
Sincerely yours,
DEN DANSKE BANK
/s/ MOGENS SONDERGAARD /s/ GEORGE B. WENDELL
Mogens Sondergaard George B. Wendell
Vice President Vice President
<PAGE> 3
[DEN DANSKE BANK]
October 11, 1996
The undersigned, each of whom is a guarantor and a Subordinated Creditor,
herewith set their hand(s) and seal(s) in order to signify agreement to the
proposed First Amendment to each of the Notes and this First Amendment Letter.
DSC Communications Corporation
By: /s/ CHRISTIAN J. ORNES
-------------------------------
Title(s):
DSC Marketing Services, Inc.
By: /s/ CHRISTIAN J. ORNES
-------------------------------
Title:
DSC International Corporation
By: /s/ CHRISTIAN J. ORNES
-------------------------------
Title:
DSC Telecommunications Corporation
By: /s/ CHRISTIAN J. ORNES
-------------------------------
Title:
DSC Telecom L.P.
By: /s/ CHRISTIAN J. ORNES
-------------------------------
Title:
DSC Finance Corporation
By: /s/ CHRISTIAN J. ORNES
-------------------------------
Title:
DSC of Puerto Rico, Inc.
By: /s/ CHRISTIAN J. ORNES
-------------------------------
Title:
DSC Telecom, Inc.
By: /s/ CHRISTIAN J. ORNES
-------------------------------
Title:
Sildor Investments B.V.
By: /s/ CHRISTIAN J. ORNES
-------------------------------
Title:
<PAGE> 1
EXHIBIT 10.2
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "First Amendment") is
entered into as of the 27th day of September, 1996, by and among each Person
designated as a Lender on the signature pages hereof (such Persons are
collectively the "Lenders"), DSC COMMUNICATIONS CORPORATION, a Delaware
corporation (the "Company"), DSC FINANCE CORPORATION, a Delaware corporation,
DSC INTERNATIONAL CORPORATION, a Delaware corporation, DSC MARKETING SERVICES,
INC., a Delaware corporation, DSC OF PUERTO RICO, INC., a Delaware corporation,
DSC TELECOMMUNICATIONS CORPORATION, a Delaware corporation, DSC TELECOM, INC.,
a Nevada corporation, DSC TELECOM L.P., a Texas limited partnership (such other
corporations and limited partnerships being collectively, the "Guarantors")
(the Company and the Guarantors being collectively, the "Loan Parties"), and
NATIONSBANK OF TEXAS, NATIONAL ASSOCIATION, as Administrative Lender for the
Lenders (the "Administrative Lender") to the extent and in the manner provided
for in the Credit Agreement (defined below and herein so called).
BACKGROUND
A. The Lenders, the Loan Parties, and the Administrative Lender
are parties to that certain Multicurrency Credit Agreement dated as of May 8,
1996 (the "Credit Agreement"; terms defined in the Credit Agreement and not
otherwise defined herein shall be used herein as defined in the Credit
Agreement).
B. The Lenders, the Loan Parties and the Administrative Lender
desire to amend the Credit Agreement.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements hereafter set forth, and for other good and valuable consideration,
the receipt and adequacy of which are all hereby acknowledged, the parties
hereto covenant and agree as follows:
1. AMENDMENT. Section 5.18 of the Credit Agreement is hereby
amended to read as follows:
"5.18 Consolidated Funded Debt to Consolidated Excess Cash
Flow Ratio. On the last day of each fiscal quarter, Loan Parties will
not permit the Consolidated Funded Debt to Consolidated Excess Cash
Flow Ratio to exceed 3.25 to 1; provided, however, for purposes of the
determination of the Consolidated Funded Debt to Consolidated Excess
Cash Flow Ratio for the fiscal quarter ending September 27, 1996 and
the three immediately following fiscal quarters there shall be
excluded from the calculation of Consolidated EBITDA the special
charge to be taken against pre-tax earnings of
<PAGE> 2
Company for the fiscal quarter ending September 27, 1996 in an amount
not to exceed $96,500,000."
2. REPRESENTATIONS AND WARRANTIES TRUE; NO EVENT OF DEFAULT. By
its execution and delivery hereof, each Loan Party represents and warrants
that, as of the date hereof and after giving effect to the amendment
contemplated by the foregoing Section 1:
(a) the representations and warranties contained in the Credit
Agreement are true and correct on and as of the date hereof as made on and as
of such date;
(b) no event has occurred and is continuing which constitutes a
Default or an Event of Default;
(c) it has no claims or offsets against, or defenses or
counterclaims to, its obligations under the Loan Documents;
(d) each Loan Party has full power and authority to execute and
deliver this First Amendment, and this First Amendment and the Credit
Agreement, as amended hereby, constitute the legal, valid and binding
obligations of such Loan Party, enforceable in accordance with their respective
terms, except as enforceability may be limited by applicable debtor relief laws
and by general principles of equity (regardless of whether enforcement is
sought in a proceeding in equity or at law) and except as rights to indemnity
may be limited by federal or state securities laws; and
(e) no authorization, approval, consent, or other action by,
notice to, or filing with, any governmental authority or other Person, is
required for the execution, delivery or performance by such Loan Party of this
First Amendment.
3. CONDITIONS OF EFFECTIVENESS. This First Amendment shall be
effective as of September 27, 1996, subject to the following:
(a) the Administrative Lender shall have received counterparts of
this First Amendment executed by each Loan Party and the Determining Lenders;
and
(b) the Administrative Lender shall have received, in form and
substance satisfactory to the Administrative Lender and its counsel, such other
documents, certificates and instruments as the Administrative Lender shall
require.
4. GUARANTOR ACKNOWLEDGEMENT. By signing below, each of the
Guarantors (i) acknowledges, consents and agrees to the execution and delivery
of this First Amendment, (ii) acknowledges and agrees that its obligations in
respect of its Guaranty are not released, diminished, waived, modified,
impaired or affected in any manner by this First
- 2 -
<PAGE> 3
Amendment or any of the provisions contemplated herein, and (iii) ratifies and
confirms its obligations under its Guaranty.
5. REFERENCE TO CREDIT AGREEMENT.
(a) Upon the effectiveness of this First Amendment, each reference
in the Credit Agreement to "this Agreement", "hereunder", or words of like
import shall mean and be a reference to the Credit Agreement, as affected and
amended by this First Amendment.
(b) The Credit Agreement, as amended by this First Amendment, and
all other Loan Documents executed in connection therewith shall remain in full
force and effect and are hereby ratified and confirmed.
6. COSTS, EXPENSES AND TAXES. The Company agrees to pay on
demand all costs and expenses of the Administrative Lender in connection with
the preparation, reproduction, execution and delivery of this First Amendment
and the other instruments and documents to be delivered hereunder.
7. EXECUTION IN COUNTERPARTS. This First Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument.
8. GOVERNING LAW: BINDING EFFECT. This First Amendment shall be
governed by and construed in accordance with the laws of the State of Texas and
shall be binding upon each Loan Party, the Administrative Lender, each Lender
and their respective successors and assigns.
9. HEADINGS. Section headings in this First Amendment are
included herein for convenience of reference only and shall not constitute a
part of this First Amendment for any other purpose.
10. ENTIRE AGREEMENT. THE CREDIT AGREEMENT, AS AMENDED BY THIS
FIRST AMENDMENT, AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES.
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
- 3 -
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment as the date first above written.
BORROWER:
DSC COMMUNICATIONS CORPORATION,
a Delaware corporation
By: /s/ CHRISTIAN J. ORNES
-----------------------------------
Christian J. Ornes
Vice President and Treasurer
GUARANTORS:
DSC FINANCE CORPORATION,
a Delaware corporation
By: /s/ CHRISTIAN J. ORNES
-----------------------------------
Christian J. Ornes
Vice President and Treasurer
DSC INTERNATIONAL CORPORATION,
a Delaware corporation
By: /s/ CHRISTIAN J. ORNES
-----------------------------------
Christian J. Ornes
Vice President and Treasurer
- 4 -
<PAGE> 5
DSC MARKETING SERVICES, INC.,
a Delaware corporation
By: /s/ CHRISTIAN J. ORNES
-----------------------------------
Christian J. Ornes
Vice President and Treasurer
DSC OF PUERTO RICO, INC.,
a Delaware corporation
By: /s/ CHRISTIAN J. ORNES
-----------------------------------
Christian J. Ornes
Vice President and Treasurer
DSC TELECOMMUNICATIONS CORPORATION,
a Delaware corporation
By: /s/ CHRISTIAN J. ORNES
-----------------------------------
Christian J. Ornes
Treasurer
DSC TELECOM, INC.,
a Nevada corporation
By: /s/ CHRISTIAN J. ORNES
-----------------------------------
Christian J. Ornes
Treasurer
- 5 -
<PAGE> 6
DSC TELECOM L.P.,
a Texas limited partnership
By: DSC TELECOMMUNICATIONS
CORPORATION, its General Partner
By: /s/ CHRISTIAN J. ORNES
--------------------------------
Christian J. Ornes
Treasurer
LENDERS:
NATIONSBANK OF TEXAS, NATIONAL
ASSOCIATION
By: /s/ BRENT W. MELLOW
-----------------------------------
Brent W. Mellow
Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ JENNY A. GILPIN
------------------------------------
Name: Jenny A. Gilpin
------------------------------
Title: Vice President
-----------------------------
- 6 -
<PAGE> 7
ABN AMRO BANK N.V. HOUSTON AGENCY
By: ABN AMRO North America, Inc.,
as agent
By: /s/ LILA JORDAN
-------------------------------
Name: Lila Jordan
-------------------------
Title: Vice President and
Director
------------------------
By: /s/ RONALD A. MAHLE
-------------------------------
Name: Ronald A. Mahle
-------------------------
Title: Group Vice President and
Director
------------------------
COMMERZBANK AKTIENGESELLSCHAFT,
ATLANTA AGENCY
By: /s/ H. YERGEY
-----------------------------------
Name: H. Yergey
-----------------------------
Title: Vice President
----------------------------
By: /s/ E. KAGERER
-----------------------------------
Name: E. Kagerer
-----------------------------
Title: Vice President
----------------------------
CORESTATES BANK N.A.
By: /s/ RANDAL D. SOUTHERN
-----------------------------------
Name: Randal D. Southern
-----------------------------
Title: Vice President
----------------------------
- 7 -
<PAGE> 1
Exhibit 11
DSC COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Computation of Income (Loss) per Share
(In thousands)
(Unaudited)
The following table sets forth the computation of shares used in the
calculation of income (loss) per share for the three months and nine months
ended September 30, 1996 and 1995.
Average Shares Used in Income (Loss) per Share Calculation:
- -----------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- -------------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Weighted average
shares outstanding
during the period..................... 116,964 115,011 116,269 114,445
Common share equivalents
outstanding:
Options and warrants
issued and
contingently issuable............... -- (A) 5,284 -- (A) 5,217
Assumed purchase of
treasury shares..................... -- (A) (1,627) -- (A) (1,716)
------- ------- ------- -------
Weighted average shares
used in calculation................... 116,964 118,668 116,269 117,946
======= ======= ======= =======
</TABLE>
(A) Common stock equivalents are not included in the income (loss) per share
calculation in a period in which a net loss is incurred since their
inclusion would be antidilutive.
Fully diluted income per share is not shown since the dilutive effect is less
than three percent for the three months and nine months ended September 30,
1995.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 133,654
<SECURITIES> 286,803
<RECEIVABLES> 337,559
<ALLOWANCES> 0
<INVENTORY> 329,169
<CURRENT-ASSETS> 1,224,082
<PP&E> 740,650
<DEPRECIATION> 341,852
<TOTAL-ASSETS> 1,922,619
<CURRENT-LIABILITIES> 453,304
<BONDS> 276,036
0
0
<COMMON> 1,222
<OTHER-SE> 1,116,167
<TOTAL-LIABILITY-AND-EQUITY> 1,922,619
<SALES> 990,331
<TOTAL-REVENUES> 990,331
<CGS> 602,889
<TOTAL-COSTS> 685,389
<OTHER-EXPENSES> 176,334
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,806
<INCOME-PRETAX> (40,489)
<INCOME-TAX> (15,386)
<INCOME-CONTINUING> (25,103)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (25,103)
<EPS-PRIMARY> (0.22)
<EPS-DILUTED> 0
</TABLE>
